International Journal of Academic Research in Business and Social Sciences

search-icon

Corruption and Growth in ASEAN Countries: A Non-Linear Investigation

Open access
This paper examined the nexus between corruption and economic growth of the Association of Southeast Asian Nations (ASEAN) countries covering the period from 1996 to 2018. Most of the ASEAN countries experiencing high level of corruption associated with robust economic growth performance. This phenomenon is opposite against the prevalent proposition of negative linkage between corruption and economic growth. Therefore, a non-linearity analysis has been incorporated to cover the changes in the effect of corruption on economic growth. This finding revealed there is a significant U-shaped relationship between control of corruption and economic growth of ASEAN countries. In other words, corruption may indirectly facilitate the growth until certain threshold level, ultimately, corruption is substantially reducing growth as corruption level under control. Empirical results indicate that the threshold level of corruption is approximately 1.84 on a 5-point scale of corruption control. This shows that corruption will be detrimental to growth when the corruption level is beyond the threshold level. The speed of adjustment implies that ASEAN countries was vulnerable to the variations as it takes longer time to adjust to long-run equilibrium, particularly on economic growth, trade openness, and inflation. The granger causality test denotes the causality between control of corruption and other variables are mutually complementary.
Abu, N., Karim, M. Z. A., & Aziz, M. I. A. (2015). Corruption, political instability and economic development in the Economic Community of West African States (ECOWAS): Is there a causal relationship? Contemporary Economics, 9(1), 45-60.
Aidt, T., Dutta, J., & Sena, V. (2008). Governance regimes, corruption and growth: Theory and evidence. Journal of Comparative Economics, 36(2), 195-220.
Amin, M. (2016). Informal firms in Myanmar. Enterprise Surveys Country Note Series, No.33. Informality. World Bank Group. Retrieved from
http://documents.worldbank.org/curated/en/204971482736208631/pdf/111251-BRI-PUBLIC-Informality-33.pdf.
Ata, A. Y., & Arvas, M. A. (2011). Determinants of economic corruption: A cross- country data. International Journal of Business and Social Science, 2(13), 161-169.
Ayayd?n, H., & Hayaloglu, P. (2014). The effect of corruption on firm growth: Evidence from firms in Turkey. Asian Economic and Financial Review, 4(5), 607-624.
Azam, M., & Emirullah, C. (2014). The role of governance in economic development: Evidence from some selected countries in Asia and the Pacific. International Journal of Social Economics, 41(12), 1265-1278.
Aziz, M. N., & Sundarasen, S. D. D. (2015). The impact of political regime and governance on ASEAN economic growth. Journal of Southeast Asian Economics, 32(3), 375-389.
Bai, J., & Perron, P. (2003). Computation and analysis of multiple structural change models. Journal of Applied Econometrics, 18(1), 1-22.
Bhargava, V. (2005). The cancer of corruption. World Bank Global Issues Seminar Series. Retrieved from
http://www.eisourcebook.org/cms/February%202016/The%20Cancer%20of%20Corruption.pdf
Bhattacharjee, J., & Haldar, S. K. (2015). Economic growth in South Asia: Binding constraints for the future. Journal of South Asian Development, 10(2), 230-249.
Bildirici, M. E. (2014). Relationship between biomass energy and economic growth in transition countries: Panel ARDL approach. Global Change Biology (GCB) Bioenergy, 6(6), 717-726.
Bose, N., Capasso, S., & Murshid, A. P. (2008). Threshold effects of corruption: Theory and evidence. World Development, 36(7), 1173-1191.
Cie?lik, A., & Goczek, L. (2018). Control of corruption, international investment, and economic: Evidence from panel data. World Development, 103, 323-335.
Corruption Eradication Commission (KPK). (2015). Preventing state losses in Indonesia’s forest sector: An analysis of non-tax forest revenue collection and timber production administration. Directorate of Research and Development, Deputy for Prevention, Corruption Eradication Commission (KPK), Republic of Indonesia. Retrieved from https://acch.kpk.go.id/images/tema/litbang/pengkajian/pdf/Preventing-State-Losses-in-Indonesia-Forestry-Sector-KPK.pdf
D’Agostino, G. D., Dunne, J. P., & Pieroni, L. (2012). Corruption, military spending and growth. Defence and Peace Economics, 23(6), 591-604.
Drury, A. C., Krieckhaus, J., & Lusztig, M. (2006). Corruption, democracy, and economic growth. International Political Science Review, 27(2), 121-136.
Engle, R. F., & Granger, W. J. (1987). Co-integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251-276.
Enterprise Surveys. (2019). Corruption: East Asia & Pacific. The World Bank. Retrieved from
https://www.enterprisesurveys.org/data/exploretopics/corruption#east-asia-pacific
GAN Integrity. (2016). Laos corruption report. GAN Business Anti-Corruption Portal. Retrieved from https://www.business-anti-corruption.com/country-profiles/laos/
GAN Integrity. (2017a). The Philippines corruption report. GAN Business Anti-Corruption Portal. Retrieved from https://www.business-anti-corruption.com/country-profiles/the-philippines/
GAN Integrity. (2017b). Vietnam corruption report. Retrieved from https://www.business-anti-corruption.com/country-profiles/vietnam/
Ghalwash, T. (2014). Corruption and economic growth: Evidence from Egypt. Modern Economy, 5(10), 1001-1009.
Granger, C. W.
In-Text Citation: (Haw et al., 2020)
To Cite this Article: Haw, T. J., Kueh, J., & Ling, S. W. S. (2020). Corruption and Growth in ASEAN Countries: A Non-Linear Investigation. International Journal of Academic Research in Business and Social Sciences, 10(3), 347–369.